As I've mentioned, the Parliamentary Accounts Committee is reporting on HMRC tomorrow - focusing in no small part on its deal with Vodafone. Yesterday in the Telegraph Vodafone put in a pre-emptive response, saying:
“The Vodafone/HMRC settlement was focused on some of the most complex tax legislation anywhere in the world. It involved nine years of legal argument through two independent UK tax authority appeals, three court cases — before the European Court of Justice, the UK High Court and Court of Appeal — followed by an application to the UK Supreme Court.” He said this was then followed by “a full and rigorous six-month technical and legal review by HMRC”, leading to the final £1.25bn settlement. “Vodafone has no unpaid tax bill in the UK and those who claim otherwise do so without any foundation whatsoever.”
Now of course the last statement is true: the matter has been settled by negotiation and no one is saying anything else. But the Vodafone statement is a little light on detail. First, Vodafone lost the case. They paid £1.25 billion. They paid because they had sought to avoid tax and did not in the end do so.
Second, the statement doesn't note that Vodafone fought this for nine years and lost. Indeed, as I understand it at the time of settlement Vodafone's application for permission to appeal to the House of Lords (or Supreme Court) following HMRC's victory in the Court of Appeal had been rejected. That's how emphatically HMRC was winning the case.
Third, there seems to be no recognition of that fact that despite this meaning that Vodafone had no further right of appeal a strange deal was done. Now nothing suggests impropriety on Vodafone's part as a result. I stress that. But it sure as heck suggests something very odd at HMRC, and that's the focus for the attention. That and the fact that, without doubt, Vodafone were trying to avoid tax. Which makes you wonder why they're so coy at admitting it when they seem to think it's their duty to shareholders to do so.
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“Second, the statement doesn’t note that Vodafone fought this for nine years and lost all the way.”
Not so. Vodafone won at the Special Commissioners and in the High Court. It was HMRC that appealed both times.
And won time and again
No Richard, there were three court cases. Sp Comms, High Court and Court of Appeal.
Vodafone won 2 of them, HMRC the third. That just isn’t “time and again”.
Since it seems my use of a common turn of phrase confused you I’ve deleted it
the most crucial point is that HMRC won in the Court of Appeal and Vodafone were denied leave to appeal when they applied to the Supreme Court. so the Vodafone statement is misleading and Richard is right to point out that they’ve exhausted their rights of appeal.
Correct – denied leave to appeal on a specific technical issue and not on the facts.
The matter of overall assessment regarding the CFC was still very much alive when HMRC decided to do a deal with Vodafone.
I am assuming that Vodafone lost on the principle on which the tax was being applied and not the actual quantum. Because if the latter were the case, surely the amount that HMRC had originally claimed as due plus penalties and interest would be in the public domain? At least then we could have a better idea as to how much Vodafone gainded from the settlement.
i fail to see your distinction. Vodafone claimed the CFC legislation breached EU law and could not apply to them. The Court of Appeal decided against them. The quantum should have been a more straightforward matter of determining the apportioned profit based on the group profits, which is public information. by Vodafone’s own provision, they gained almost a billion pounds!
If court papers showed that HMRC was suing Vodafone for £6bn of tax, then we should be upset. If they were suing Vodafone for £1bn of tax, £1bn of penaties and £1bn of interest, then that puts a £1.25bn settlement in a different light. And if they were suing for £1.5bn total, then a £1.25bn settlement looks even better. So knowing the actually amount HMRC was suing for would be useful.
As for vodafone providing, a company would always provide the worst case scenario based on legal advice, otherwise they open themselves up to being sued by shareholders, so I don’t think that is an accurate guide!
You clearly do not understand the cases which were n legal issues or tax provisioning or the ability of shareholders o sue a company which is virtually non existent
Commenting about your fantasy is not useful
I understand tax provisioning perfectly well and as for suing a company I am currently in the process of one for non-disclosure of material information.
Paul, actually the £2.25 was Vodafone’s provision from 2001 to 2005, when they won – I believe in the High Court – and stopped provisioning. So if they had continued from 2005 to settlement in 2010 we would have had the £6 billion Private Eye alleged. Does it matter whether it includes interest and penalties? I think not. If £6 billion was due and HMRC settled for £1.25 after a decisive win in court, that’s criminal! And I gather the settlement waived all future liabilities including liabilities under the proposed CFC legislation. Not even Hartnett has the power to usurp the power of Parliament to impose tax.
He may not have agreed with that
Read the report tomorrow…..
Of course it matters if it included interest and penalties. If you and HMRC disagree and go to court and HMRC loses twice before winning, would you think it is fair to pay interest for the period when the court said that you were right? I was just making the point that we are arguing about whether HMRC was right or wrong in settling and it appears we are basing that on a number quoted in a private eye article.
Where do you think Private Eye got the information from?
Maybe disaffected HMRC staff
And why did they take that risk?
Oh, what about this phrase: ‘the most complex tax legislation anywhere in the world’! Tax legislation, it seems to me, is deliberately obfuscated and complicated IN ORDER that it can be hidden behind. Why is tax so complicated that a large multinational can drag what ought to be a simple case of non-payment through the courts for 9 years? you earn here, you pay your taxes here. it works for the 99%
If the tax legislation is so complex that it can cost the british taxpayer billions (be it one or 6!)at a time when the lowest paid can’t afford their heating bills, it’s too complicated. Hiding behind this is dishonourable and disgraceful.
And I genuinely believe it can be simplified……
in 1995 the tax legislation was confined to 2 (admittedly large) books – today it is 7 books with a separate volume for an index. This is an age of “tax simplification” we are told………..the volume of tax law is incredible.
Is it really necessary to have so much legislation? we managed ok in 1995
Yes
It tackles the abuse of tax avoiders
The UK tax legislation is a now a joke – nothing more than an a vast amount of sticky plaster type amending legislation that has created more confusion on the law for both taxpayer and taxman.
If we are ever going to have a proper tax system, a review of the tax laws and new, fresh, legislation is required.
OK
I’ll rewrite it, next year
“Where do you think Private Eye got the information from?”
It was a calculation by Richard Brooks, one which he has shared by email.
“Paul, actually the £2.25 was Vodafone’s provision from 2001 to 2005, when they won — I believe in the High Court — and stopped provisioning. So if they had continued from 2005 to settlement in 2010 we would have had the £6 billion Private Eye alleged.”
And that’s exactly what the calculation was. With one proviso: Vodafone stopped provisioning when HMRC lost Cadbury. You know, when the law said they didn’t owe the tax?
Do you honestly think a journalist reveals his sources?
You’re more naive than I thought Tim
And as for Cadbury – if you were right Vodafone would not have paid
It really is elephant trap time for you tonight Tim
I do wonder just how many people have actually read the case in the Court of Appeal, actually know what the issues were and what the decision of the court was. Finally, does anybody know what the grounds of appeal to the Supreme Court were and why they were rejected.